Updated July 26, 2020
If you are hoping for student loan relief or student loan forgiveness, you may not find it in the new incentive package.
Here’s What You Should Know.
Senate Leader Mitch McConnell (R-KY) is expected to submit its proposal for the new stimulus package on Monday. According to an drought of the latest stimulus package assessed by the New York Times, the stimulus package does not contain any mention of student loans. This includes any extension of the student loan deduction in the Cares Act or forgiveness of student loans. While proposals and numbers can change if both parties prepare a bill, they do it is increasingly unlikely that student loans will be part of the new incentive. This can of course change before a final stimulus package is approved.
Student loan benefits may end on September 30, 2020
Congress passed the Cares Act – the $ 2.2 trillion financial stimulus package – that brought multiple benefits to your student loans, including:
- Congress all payments for federal student loans are interrupted until September 30, 2020.
- Congress too set interest rates to 0%, so no interest will accrue on your federal student loans during this time.
- Congress stopped collecting federal student loan loans during this time.
- Congress allowed the non-payment of federal student loan debt during this period to “count” toward the 120 required monthly payments for forgiveness of a public service loan.
In the absence of an extension, these student loans will expire on September 30, 2020. This means that the student loan payments would already resume on October 1, 2020. The Cares Act also did not include student loan waivers. Likewise, the proposal for a new stimulus package is also unlikely to include forgiveness of student loans. House Democrats backed $ 10,000 in student loan forgiveness for financially struggling borrowers, but that provision in the Heroes Act – the $ 3 trillion incentive bill passed by Democrats in the House of Representatives – has not become law.
What is in the new stimulus package?
While student grants may not be part of the stimulus package, this does not mean that you will not get economic relief. It is expected that second stimulus checks will be included in the new stimulus package. Treasury Secretary Steven Mnuchin has confirmed that there will be a second $ 1,200 stimulus check for each individual. The criteria for receiving a second stimulus control would be the same as the first stimulus control. If you made less than $ 75,000 (individuals) or $ 150,000 (married / joint submitters), you would receive a second $ 1,200 incentive check. The initial incentive check was tapered by $ 5 for every $ 100 adjusted gross income above those income limits to $ 99,000 adjusted gross income for individuals and $ 198,000 for married / joint filers. The good news is that Democrats are also backing a $ 1,200 second stimulus check, which could mean second stimulus checks are more likely to be confirmed for the new stimulus. The new stimulus package that McConnell will introduce also reportedly includes one extension of unemployment benefits, which expire tomorrow, worth $ 105 billion reopen schools, 5 years corporate liability protection, a Renewal of Loans for Payment Protection Program (PPP), a tax credit for employee retention and other incentives.
Proposal: no student loan if you have no income
Earlier this week, senator Lamar Alexander (R-TN) proposed a new student loan repayment plan where student loan borrowers with no income would not pay student loans. Alexander also suggested that monthly student loan payments would be based on 10% of discretionary income once a borrower returns to income. Like current income-driven repayment plans, a borrower can receive forgiveness for student loans after 20 or 25 years. Plus the months in which you paid $ 0 will count toward the 20 or 25 years before forgiveness of student loans. Alexander’s plan would apply to both existing and new student loan borrowers, and is likely limited to federal student loans only. If passed by Congress, Alexander’s plan would likely replace the nine current student loan repayment plans with these two options (no payments or 10% of the free income). It’s unclear whether Alexander’s plan would be included in the new stimulus proposal – and thus replace the Cares Act student loan deduction – or whether it’s a standalone piece of legislation.
After Republicans formally propose their stimulus package, it’s possible that proposals and numbers can change. Student loan exemption – either an extension of the student loan Cares Act or student loan waiver – is not included in the draft incentive package. Democrats have provided support for the student loan extension for another year and included $ 10,000 in student loan forgiveness for borrowers who are struggling financially. Unless Congress reaches consensus, it looks like there will be no extension of these student loans. If an agreement is reached on the reduction of student loans, don’t expect student loan forgiveness in the next stimulus bill. Also, don’t expect the extension of the Cares Act benefits to last beyond December 31, 2020. Congress has limited time before the summer recess starts after August 7, so Congress will follow this important timeline for the new stimulus. Congress probably will next stimulus package no later than 7 August, but it is also possible that Congress will not reach a consensus by then.
How to Pay Off Student Loans
If Congress doesn’t include student loan relief in the new incentive, be prepared. If you haven’t paid student loans since March, now is the time to prepare. Understand that your student loan payments may resume from October 1 if there is no renewal. Make sure you have a game plan paying off student loans. What’s the best way to start? Start with these four options, all of which are free:
Resources: student loans